Citibank and Investors Finance Corp v Modesta Sabeniano 2006 In 1985, respondent filed a complaint against petitioners.

She alleged that petitioners refused to return her deposits and the proceeds of her money market placements despite her repeated demands. The RTC rendered a decision to the effect that: 1) the setoff effected by Citibank of respondents dollar deposit with Citibank was illegal and ordered it to refund 149 thousand dollars with interest; 2) respondent is indebted to Citibank for 1 million pesos; 3) other claims dismissed. CA favoured respondent entirely. Case went to SC. Facts according to Citibank: 1. 1979, respondent obtained a set of loans covered by PNs (1st set) from Citibank which totalled to 1.92 million pesos; 2. When respondent failed to pay the 1st set of PNs, these were renewed several times, making it necessary the execution of new PNS by respondent in favour of Citibank (2nd set); the principal amount remained at 1.92 million pesos; 3. All PNs stated that the purpose of the loans is to liquidate existing obligation except for one which stated purpose is for personal investment; 4. Respondent secured the loans by executing Deeds of Assignment of her money market placements with petitioner FNCB; 2 deeds worth 500k each; 5. In addition to the deeds of assignment of respondents money market placements with FNCB, respondent also executed a Declaration of Pledge in which she supposedly pledged all present and future fiduciary placements held in my personal and/or joint name with Citibank, Switzerland, to secure all claims the petitioner Citibank may have against respondent; 6. When respondent failed to pay the 2nd set of PNs upon maturity, an exchange of letters between the parties ensued; 7. By 1979, respondents outstanding obligations to Citibank totalled around 2 million pesos (principal plus interests); 8. Relying on the deeds of assignment, Citibank applied the proceeds of respondents money market placements with FNCB, as well as her deposit account with Citibank, to partly liquidate respondents loan balance; Respondent disputes the narration of facts concerning her loans and the alleged authority she gave for the off-set of her money market placements and deposit accounts with petitioners against her obligation. W/N compensation was warranted with regard to loan and deposit account. Yes. Art. 1278. Compensation shall take place when two persons, in their own right, are creditors and debtors of each other. Art. 1279. In order that compensation may be proper, it is necessary; (1) That each one of the obligors be bound principally, and that he be at the same time a principal creditor of the other; (2) That both debts consist in a sum of money, or if the things due are consumable, they be of the same kind, and also of the same quality if the latter has been stated; (3) That the two debts be due; (4) That they be liquidated and demandable; (5) That over neither of them there be any retention or controversy, commenced by third persons and communicated in due time to the debtor.

Respondent and Citibank were creditor and debtor of each other; Citibank was creditor with respect to respondents loan and latter was creditor with respect to her savings account with Citibank; As far as her deposit account was concerned, since bank deposits, whether fixed, savings, or current, should be considered as simple loan or mutuum by the depositor to the banking institution; Both debts consist in sum of money; Compensation takes place by operation of law, so even in the absence of express authority from respondent, Citibank had the right to effect the partial compensation of respondents outstanding loans with her deposit account (31k);

W/N compensation was valid with regard to the money market placements and loans. No, but payment authorized by deed of assignment. Proceeds of money market placements with FNCB amounted to around 1 million pesos; Here, respondent was creditor and FNCB was the debtor; while as to the outstanding loans, Citibank was creditor while respondent the debtor; Hence, legal compensation would not apply; Citibank exercised its rights to the proceeds of respondents money market placements with FNCB by virtue of the Deed of Assignment: CA did not consider the deed for petitioners failure to produce the original copies (in violation of the best evidence rule); SC disagrees; The deeds are important in establishing the authority given by respondent to Citibank to use as security for her loans her money market placements with FNCB; Paragraph 2: In the event the OBLIGATIONS are not paid at maturity or upon demand, as the case may be, the ASSIGNEE is fully authorized and empowered to collect and receive the PLACEMENT (or so much thereof as may be necessary) and apply the same in payment of the OBLIGATIONS; Paragraph 5: This Assignment shall be considered as sufficient authority to FNCB Finance to pay and deliver the PLACEMENT or so much thereof as may be necessary to liquidate the OBLIGATIONS, to the ASSIGNEE; Citibank partially extinguished respondents obligations thru the application of the security given by the respondent for her loans: Although the pertinent documents were entitled Deeds of Assignment, they were, in reality, more of a pledge by respondent to petitioner Citibank of her credit due from petitioner FNCB Finance by virtue of her money market placements with the latter; When the PNs for the money market placements mature without them being redeemed, Citibank collected from FNCB the proceeds thereof, and applied the same against respondents outstanding loans (leaving no surplus); Balance still left (despite legal compensation and application of proceeds of PNs from money market placements): Citibank the proceeded to apply respondents dollar accounts with Citibank-Geneva against the remaining (pursuant to a Declration of Pledge); But SC deems the same exceedingly suspicious and irregular; o Declaration of Pledge unnotarized; while no requirement of notarization, it could not enjoy prima facie presumption of due execution; o Citibank unable to establish date when Declaration of Pledge was actually executed; it presented only a photocopy; respondent was able to secure a copy dated September 24,

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1979 but she proved that she was out of the country at that time; It was irregularly filled-out; in the space for pledgor, Citibank was typewritten; it made no sense; Respondent denied that it was her signature on the declaration; forgery; when a document is alleged on the basis of forgery, best evidence rule is applied; no original document;

PARTLY GRANTED. CA AFFIRMED with MODIFICATION.